France Responds To Corporate Land Tax Crisis

29.11.2012

The French finance ministry has provided its assurances that the government is currently making every effort to limit, in the shortest possible timeframe, the effect of the explosive rise this year in the country's corporate land tax contribution (la cotisation foncière des entreprises - CFE) on small companies.

Underlining the need to respond urgently to the untenable situation, the finance ministry explained that a number of entrepreneurs and "auto-entrepreneurs" have expressed their concerns recently regarding the very significant rise in their corporate land tax contribution.

The finance ministry insisted that the increase, recorded in many communes across France this year, is in no way attributable to any government decisions.

According to the finance ministry, the sharp rise is due to the abolition by the former French government of local business tax (la taxe professionnelle) and its replacement by a new economic contribution (CET), which includes both the CFE as well as a levy on the value added by a company (CVAE).

The ministry highlighted the fact that the reform was badly managed at the time by the former government, noting that the previous majority did not first carry out any simulation work, nor did it undertake an impact study, or obtain sufficient information from local authorities, responsible for collecting the tax.

Confirming that many communes have indeed elected to increase the CFE contribution in 2012, the ministry said that this has lead to a dramatic rise in the tax burden weighing heavily on the smallest businesses in France, in what is already a difficult economic context. Only very few local authorities have made use of the opportunity to reduce by 50% the taxation of companies with turnover below EUR10,000 (USD12,867), the ministry pointed out.

Concluding, the ministry stressed that the former government had clearly not anticipated the consequences of the local business tax reform, and reiterated that the government would respond to the urgent situation as quickly as possible.

The finance ministry's assurances follow hot on the heels of concerns raised by the French industry body representing small- and medium-sized enterprises (SMEs) in France, CGPME.

CGPME denounced the explosive rise in the country's land tax contribution levied on companies, highlighting the government's commitment within the framework of its competitiveness pact to stabilizing, for the duration of its five-year term in office, key fiscal measures deemed vital for businesses and for corporate investment, including the CET contribution and therefore the CFE.

Underlining the need for greater coherency, the CGPME urged the government to obtain from local authorities a firm commitment to not increasing the levy over the course of the next five years, pointing out that businesses that have already received their CFE tax advice notice have reported an exorbitant increase in the amount of tax due.

Echoing these views, the French professional union of artisans (UPA) stressed that the CFE tax has trebled and in some cases even quadrupled over the last two years. Denouncing the rise, and insisting that the reform of local business tax has merely served to benefit large corporations to the further detriment of SMEs, the union called on local authorities to intervene to limit tax rises this year and to establish a fairer tax base for 2013.

The UPA warned that the situation is all the more unacceptable given the government's recent announcement of plans to exempt auto-entrepreneurs from CFE for 2012, exacerbating the unfair competitive advantages currently benefiting auto-entrepreneurs.